American Air sets China flights

Airlines have long battled over Orlando, New York, Miami, Las Vegas and other cities, matching and dropping prices to lure customers from their competitors.

Add Shanghai to that list.

On April 2, American Airlines launches service from O'Hare International Airport to Shanghai with an introductory $625 round-trip fare. United Airlines, which has enjoyed a monopoly on Chicago-to-China service, has dropped its economy-class ticket price by more than half to match American's.

"Asia is a battleground now," said New York-based travel analyst Bob Harrell. "United has been there since buying its routes from Pan Am. American is the relative new kid on the block."

For years, Northwest Airlines and United were the only two U.S. carriers allowed to fly into China, while three Chinese carriers had permission to serve the United States.

A 2004 agreement between U.S. and Chinese officials cleared the skies for additional service. Continental began flights from Newark, N.J., to Beijing last year. American was approved for service from O'Hare. China was given approval for more flights into the United States, and cargo flights between the two countries also increased.

Expanding internationally has been a priority for large carriers. The service gives them a chance to enjoy the benefits of increased demand for tickets at home and abroad, and international fares often fetch a premium.

Like United, American will serve Shanghai with a Boeing 777. American's introductory fare has to be booked by March 10, and the airline has said that price is about a third of what it expects to typically charge for a ticket.

Even with direct competition between United and American for service to China's largest city, the pressure the two put on each other's fares won't be the same as it is when they vie for passengers in the domestic market, said Terry Trippler, airfare analyst with Cheapseats.com.

"Two non-stops to the same city can compete internationally, and the fares will be different," he said. "The demand [and] desire to match on international flights isn't the same. United's prices may come down, but they may not come all the way to American's level."

Frequent-flier discounts and upgrades influence the decision on which carrier to fly. Business travelers often have a relationship with a particular airline. United's large presence in Asia--no U.S. carrier has more service there--benefits the airline, Trippler said.

Efforts are under way to expand United's China presence. It has pressed Chinese officials for more access to Shanghai and Beijing, and it has asked permission to serve Guangdong Province in southern China.

"China is a very special market, a very important market," said Michael Whitaker, United's vice president of international and regulatory affairs. He noted that the airline recently celebrated its 20th anniversary serving China.

In negotiations between the United States and China this spring, talks will focus on expanding service, Whitaker said. United has told authorities in both countries that it is interested in boosting existing service and adding destinations.

"We've made clear that if they would remove restrictions on Guangdong and loosen restrictions, we'd be interested in serving it from San Francisco," he said.